As part of the drive to help first-time buyers throughout England, Barclays has launched a new zero-deposit mortgage for first-time buyers that are buying their home through the Government's Right to Buy initiative. The product is intended to remove one of the greatest barriers to tenants of council or housing association homes: the need to save for a deposit.
Helping Tenants Become Homeowners
The Right to Buy policy entitles successful tenants of councils and housing associations to purchase their homes at a discount. However, although the scheme has been highly popular, many people who want to buy homes have not been able to make the jump up the property ladder due to struggling to find the savings required for a traditional deposit.
Recognising this hurdle, Barclays has stepped in with an offer that accepts the Right to Buy discount as a deposit. Under the new mortgage offer, customers can borrow the entire discounted sale price of the property without having to pay any funds as a deposit. This is particularly useful for those who may be paying rent but find it difficult to save at the same time.
How Does the Zero-Deposit Mortgage Work?
Barclays' answer is that the discount obtained under the Right to Buy scheme is treated as equity in the property. So, for example, if a property is worth £200,000 on the market and the buyer is offered a 40% discount (£80,000), they can mortgage the remaining £120,000 with no personal deposit required. In this case, the purchaser is, in effect, taking a mortgage on a 60% loan-to-value (LTV) basis, giving access to more attractive interest rates than would otherwise be on offer for high-LTV lending.
However, there are protections built in. The mortgage will not be more than 90% of the full market value of the property. That is, though Barclays will lend 100% of the discounted sum, the total loan will not be more than 90% of the property's value on the open market.
Exceptions for High-Value Properties
The plan does have upper limits for high-value properties. For houses over £640,000 in value and flats over £310,000, Barclays will still insist on a deposit. In those instances, borrowers can get up to 85% of the discounted purchase price, which will keep the loan at no more than 80% of the market value of the property.
This is to ensure that there is responsible lending, especially to households in regions with fast-rising house prices.
Supporting a New Generation of Buyers
Lee Chiswell, Head of Mortgages at Barclays, expressed the bank’s commitment to expanding homeownership:
“The Right to Buy scheme has long been a crucial route to home ownership for council and housing association tenants, yet we know that saving for a deposit remains a key obstacle. By lending for the full value of the property, we’re removing the need for buyers to have any deposit at all, helping many completely sidestep their largest barrier to home ownership.”
This initiative reflects Barclays’ wider mission to make the dream of homeownership a reality for more people, especially those who may be marginalised or financially stretched.
Capitalising on Previous Gains
The guidance on the zero-deposit Right to Buy mortgage comes after Barclays recently launched 'Mortgage Boost'. This allows friends or family to assist applicants in boosting their borrowing capacity without giving or lending money. It indicates heightened sensitivity across the banking industry for the demand for innovative, flexible mortgage offerings in the context of soaring house prices and persistent cost-of-living pressures.
As well as this, Barclays has also increased its upper loan limits for higher LTV mortgages. This allows borrowers to borrow more with a 10% deposit, making homes that might previously have been unaffordable now available.
Who is Eligible and How to Apply
The zero-deposit mortgage is offered to qualifying tenants in England who are eligible for the Right to Buy scheme. The borrowers will have to provide evidence of their Right to Buy eligibility and satisfy standard affordability tests as determined by Barclays. Prospective customers are invited to go to the official Barclays webpage for complete information on the mortgage offer, eligibility, and how to apply.
Final Thoughts
As homeownership turns into a struggle for the multitude in the UK, Barclays' zero-deposit mortgage for Right to Buy applicants is a welcome intervention. By waiving the cash deposit, the bank is helping more tenants transition from rented to property ownership, a step that is essential in creating long-term financial security and stability.
This new product is not just a win for prospective buyers, it also assists in achieving wider aspirations of expanding homeownership and affordable housing nationally.